H and M Constructions (NSW) Pty Ltd v Golden Rain Development Pty Ltd

[2021] NSWSC 708

Supreme Court

New South Wales

Medium Neutral Citation:

H & M Constructions (NSW) Pty Ltd v Golden Rain Development Pty Ltd [2021] NSWSC 708

Hearing dates:

On the papers

Decision date:

16 June 2021

Jurisdiction:

Equity - Technology and Construction List

Before:

Stevenson J

Decision:

Security for costs ordered up to time of proposed mediation

Catchwords:

COSTS – security for costs – where no dispute that Court’s jurisdiction to order security enlivened – whether plaintiff’s claim should be seen as defensive – where defendant foreshadowed possible cross-claim but eschews current intention to bring a cross-claim

Legislation Cited:

Australian Consumer Law

Corporations Act 2001 (Cth)

Uniform Civil Procedure Rules 2005 (NSW)

Category:

Procedural rulings

Parties:

H & M Constructions (NSW) Pty Ltd (Plaintiff/Respondent)
Golden Rain Development Pty Ltd (Defendant/Applicant)

Representation:

Counsel:
D J Batt QC with F Cameron (Plaintiff/Respondent)

Solicitors:
Pinsent Masons (Plaintiff/Respondent)
Allens (Defendant/Applicant)

File Number(s):

SC 2021/115569

Judgment

1. The Plaintiff, H & M Constructions (NSW) Pty Ltd, is a construction contractor. The Defendant, Golden Rain Development Pty Ltd, is a developer. H & M and Golden Rain are parties to a construction contract.

2. H & M commenced these proceedings in the Supreme Court of Victoria on 5 March 2021 seeking ex parte relief to restrain Golden Rain from calling on a bank guarantee under the contract.

3. The security had already been converted into cash but a continuing restraint on recourse to that cash was ordered by consent and remains in place.

4. H & M filed a Statement of Claim in the Supreme Court of Victoria which pleads breach of the contract, unconscionable conduct under the Australian ConsumerLaw and seeks the return of security and damages.

5. On 9 April 2021 the proceedings were transferred to this Court.

6. By Notice of Motion dated 27 April 2021 Golden Rain seeks security for costs.

7. There has been no relevant delay in the bringing of the application, as was foreshadowed as early as 30 March 2021 when the proceedings were still in the Supreme Court of Victoria.

8. H & M does not dispute that the Court’s jurisdiction to order security is enlivened.

9. However, H & M contends that its proceedings are “defensive” and that H & M is, in effect, a defendant in these proceedings, which have been triggered by Golden Rain taking “self-help” procedures by seeking to have recourse to the bank guarantees provided by H & M under the construction contract.

10. However, H & M seeks substantive relief in the proceedings. It pleads breaches of the construction contract and unconscionable conduct under the Australian Consumer Law.

11. I do not see that H & M, in substance, should be seen as a defendant in the proceedings.

12. H & M Constructions that:

“The defensive nature of H & M’s claim is further highlighted by the fact that Golden Rain has foreshadowed making a claim (which it refuses to bring forward as a cross-claim) on the basis that it asserts it ‘has other claims against the Contractor, including for damages, which may exceed the amount of the Replacement Security’.”

13. In those circumstances, on 7 June 2021 my Associate wrote to the parties:

“The defendant’s application for security costs has been referred to his Honour for determination.

His Honour does not consider it appropriate to deal with the application until the defendant makes a clear statement as to whether or not it proposes to make a cross claim in the proceedings”.

14. Golden Rain has responded to that email by an affidavit sworn by its solicitor, Mr Jonathan Light, in which it is stated:

“Conduct to date

9. I have not received any instructions from [Golden Rain] to perform any work on a cross-claim against the Plaintiff.

10. None of the solicitors at Allens, or counsel, instructed by [Golden Rain] in these proceedings have spent any time drafting a cross-claim.

11. None of the incurred costs or estimated future costs in my affidavits made in support of the [Golden Rain’s] motion for security, or in the expert report of Ross Nicholas [a costs assessor] dated 31 May 2021, include the costs of a cross-claim against the Plaintiff.

No proposal to file a cross-claim

12. I am informed by Mr Rosemary Ren, a director of [Golden Rain] and the person who gives day-to-day instructions to Allens for the conduct of the matter on behalf of [Golden Rain], and believe that:

a. [Golden Rain] has no present intention to pursue a cross-claim against the [H & M], and does not foresee that a cross-claim against [H & M] will be filed;

b. out of an abundance of caution, [Golden Rain] does not waive its right to seek leave to pursue a cross-claim if some unforeseen event occurs in the future that makes it appropriate to seek leave to pursue a cross-claim against [H & M]; and

c. should [H & W] be ordered to give security for [Golden Rain’s] costs, [Golden Rain] is willing to consent to an order to the effect that, in the event [Golden Rain] does seek leave to pursue a cross-claim against [H & M], the order for security that has been made may be revisited as appropriate”.

15. I do not see this as being an unequivocal response to the enquiry that I, through my Associate, made of Golden Rain.

16. I will return to this below.

17. Golden Rain seeks security in the sum of $643,199. It has adduced evidence from a costs assessor, Mr Nicholas, who has estimated that this figure represents the amount of costs which will be recoverable by Golden Rain on an assessment were it to be successful in the proceedings.

18. The parties have agreed to attend a mediation by 30 August 2021.

19. In those circumstances, my opinion is that the appropriate amount to order for security is the amount that Mr Nicholas assessed as being Golden Rain’s recoverable costs up to and including mediation, being a figure in the order of $350,000.

20. As Golden Rain has not ruled out the possibility of bringing a cross-claim, the order for security should be qualified so that if Golden Rain does bring a cross-claim, the order for security be set aside without prejudice to Golden Rain’s entitlement to bring a further application for security.

21. In those circumstances, I make the following orders:

1. Pursuant to Uniform Civil Procedure Rules 2005 (NSW) r 42.21 and s 1335(1) of the Corporations Act 2001 (Cth):

1. The plaintiff provides security in the sum of $350,000 in respect of the costs of the defendant up to and including the mediation referred to in the Court’s orders of 25 May 2021.

2. If the plaintiff fails to pay such security within 14 days of these orders, the proceedings be stayed until the relevant security is provided.

3. In the event that the defendant seeks leave to file a cross-claim these orders be vacated without prejudice to the defendant’s entitlement to make such further application for security as it may be advised.

4. The plaintiff pay the defendant’s costs incidental of this application.

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Decision last updated: 16 June 2021